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US energy market the IntercontinentalExchange has moved to capitalise on its lead in the race among the world’s largest exchanges to become the venue for credit default swap clearing by outlining a new service for asset managers and hedge funds.

Ice, which has cleared $1.6 trillion (€1.1 trillion) of North American CDS contracts since it opened its clearing service Ice Trust US in March this year, said it has developed a CDS clearing system to be offered directly to buyside firms that it plans to launch in October, subject to US regulatory approval.

The exchange said the solution allows the “segregation of customer funds and positions” to ensure that asset managers and hedge funds are protected in the event that a clearing member defaults.

Jeffrey Sprecher, the chairman and chief executive of Ice, said: “We recognise the important role that a central counterparty plays in addressing systemic risk for all market participants.”

Ice has emerged as the leader in CDS clearing as international exchanges, such as the Chicago Mercantile Exchange, NYSE Euronext and Eurex, have moved to cash in on increased regulatory scrutiny of the over-the-counter derivatives markets following the collapse late last year of US financial giants Lehman Brothers and AIG.

Barack Obama’s Treasury secretary Tim Geithner outlined at the end of May this year radical changes including the implementation of central counterparties, such as Ice Trust US, as well as regulated exchanges and trading platforms.

The European Commission followed this lead at the start of this month when it published a long-awaited report advocating that clearing "grow substantially to cover large parts of OTC derivatives”, but stopped short of calling for trades to be forced onto exchanges.

Ice Clear Europe, the exchange’s European clearing arm, is planned for launch before the end of next week to coincide with the deadline the largest European OTC dealing banks earlier this year set themselves for the adoption of CDS clearing.

Rival CME Group has also been developing a CDS platform. Craig Donahue, chief executive of the CME, said on a results conference call today: "Our plans remain fluid and we have not given any guidance on the timing."

Chris Allen, an analyst at broker Pali Capital, said in a report that the opportunities around CDS for ICE and other players in this asset class are questionable. He said: "Some key politicians may be pushing for a ban of naked credit default swaps, a ban of proprietary trading of these instruments. While we believe this is a harsh and potentially uneconomic view, it points to the risk that this market is limited in terms of future growth by political/regulatory action."